Gold clings to 3-week high as weak yuan buoys safe-haven draw

13-Aug (Reuters) — Gold held near a three-week peak early on Thursday as a weaker Chinese yuan kept equities under pressure, encouraging investors to seek safe-haven assets.

FUNDAMENTALS

* Spot gold was off 0.1 percent at $1,123.25 an ounce by 0031 GMT, but not far below Wednesday’s peak of $1,125.40, its loftiest since July 20.

* U.S. gold for December delivery was flat at $1,123.50 an ounce.

* China’s currency fell to a four-year low on Wednesday, slumping for a second day after Beijing’s shock devaluation. Sources told Reuters that there was some support within the Chinese government for a devaluation of perhaps up to 10 percent to help struggling exporters.

* Further weakness in the yuan could pull more funds out of equities and push them into safe-haven assets such as gold.

* An adjustment to China’s currency is probably appropriate if the Chinese economy is weaker than authorities there expected, New York Fed President William Dudley said in the U.S. central bank’s first public response to the devaluation of the yuan.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.6 percent to 21.6 million ounces on Wednesday, the first increase in days after falling to the lowest since September 2008.

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